TA-Trader is an alogrithmic trader that uses technical analysis to buy and sell securities.
- Data Retrieval: retrieves closing price data from yfinance and saves to file
- Calculations: calculates the technical indicators needed for the strategy
- Analysis & Execution: uses technical indicators to place trades
I used the Moving Average Convergence Divergence (MACD) technical indicator for my trading strategy. The MACD has three main components.
First, there is the 12-day and 26-day Exponential Moving Averages (EMA) which represent a fast and a slow period. The fast period minus the slow period gives us the MACD.
Second is the signal line, which is the 9-day EMA of the MACD line.
The final element is the MACD minus the signal line, which is also known as the histogram. This is useful for identifying changes in momentum, and is what I will mainly be using.
I used a basic MACD crossover strategy, where I looked for buy and sell signals based on the histogram. Specifically, I opened positions when the histogram was went above 0.05, and I closed existing positions when the signal line went below -1.
Facebook's MACD Chart Data:
Example image taken from thinkorswim trading platform
There is not necessarily a definitive buy and sell target when using a crossover strategy such as this one. Experiement and determine what works best for your strategy. In my case, I set my sell line to -1, because I was experiencing a lot of market "fake-outs", where histogram would bottom out at around -1 then shoot back up.
- yfinance for data
- I tried out several different data vendors, but ultimately settled on yfinance as a data source because of their free and mostly reliable data
- The other implementations are available as well
- Alpaca as paper trading broker
- I used the Alpaca API as a paper trading broker to facilitate my trades